REPORT TO THE CITY IN ITS CAPACITY AS HOUSING SUCCESSOR TO THE REDEVELOPMENT AGENCY OF THE CITY OF FRESNO AND FRESNO REVITALIZATION CORPORATION DATE: September 27, 2018 FROM: MARLENE MURPHEY, Executive Director SUBJECT ..Title Consider amendment to the Restated and Amended OPA regarding the Hotel Fresno ..Body RECOMMENDATIONS It is recommended that: 1. Approval of the first amendment to the Restated and Amended Hotel Fresno Owner Participation Agreement between the Housing Successor Agency of the City of Fresno, APEC International, LLC and Hotel Fresno Apartments, LP. 2. Adopt a finding of a Categorical Exemption pursuant to Article 19, Section 15331 (Class 31) of the California Environmental Quality Act (CEQA). EXECUTIVE SUMMARY The City of Fresno in its capacity as Housing Successor (FHS) received a request from APEC International, LLC proposing to amend the January 29, 2015, Amended and Restated Owner Participation Agreement between APEC and the City as Housing Successor Agency, and as assigned and assumed by Hotel Fresno Apartments, LP., on November 4, 2016. On August 23, 2018 Council, in closed session, gave direction and approved the terms contained in the attached First Amendment to the Amended and Restated Owner Participation Agreement subject to future approval in open session. BACKGROUND On August 8, 2018 the Hotel Fresno developer submitted a Hotel Fresno-4% Scenario requesting changes in connection with the Restated and Amended OPA shown below along with an updated pro forma. 1. The developer would apply for 4% tax credits this year. 2. The project would be 100% affordable. In this regard, the 38 previously unrestricted units would be restricted to 80% AMI. 3. The project as presented has a "gap" of $2,695,347. The gap is funded/covered from the following Developer sources: a. Developer Loan/Contribution--$1,711,000. b. Deferred Developer Fee--$980,347. On August 23, 2018 the Council in closed session approved amendment terms that were outlined in a letter to APEC dated September 11, 2018 (attached) requesting signature by the developer. The terms of the letter have been drafted into the First Amendment to the Amended and Restated Owner Participation Agreement (attached) and are highlighted below: I. Amend the January 29, 2015, Amended and Restated Owner Participation Agreement between APEC and the City as Housing Successor Agency, and as assigned and assumed by Hotel Fresno Apartments, LP., on November 4, 2016, (collectively "OPA") to allow for 100% affordable units, to be funded with 4% tax credits (along with other sources). II. Amend the OPA to allow for extensions of time, with the following performance schedule: A. Outside date to secure all funding: 12/31/18. B. Outside date to obtain construction permits: 6/30/19. C. Outside date to obtain occupancy permit: 7/31/20. III. Further performance extensions can only be approved by Council in its discretion and for good cause shown by Developer. IV. Developer to immediately deed the Kidney Lot parcel to the City: A. Any funds expended by the City for the purpose of clearing title and encumbrances to the Lot shall be considered advances against and deducted from the balance of OPA committed funds, which currently is approximately $1,048,700. V. If the performance schedule set forth above is not met, then the OPA is terminated and all further City performance due is terminated. VI. The deed of trust for the funds committed under the OPA shall be in no worse than second position for the life of the affordability covenants. VII. The City agrees to enter into a lease with Developer for use of the Kidney Lot as needed for the Hotel Fresno Project (Lease) on the following general terms: A. Nominal rent. B. Non-exclusive right for Developer parking in the Lot, based upon project requirements. VIII. Upon both: (i) issuance of a certificate of completion (or equivalent thereof issued by the City) for the project as defined in the OPA; and (ii) Developer closing on permanent financing, the City will: A. Release the balance of OPA committed funds in the amount of $1,048,700, less any funds expended to clear title on the Kidney Lot, as discussed above; B. Deed the Kidney Lot back to the Developer. IX. Any future development of the Kidney Lot must be consistent with applicable planning and development plans and codes. X. Developer may assign interests in the OPA and Lease with City approval, which will not be unreasonably withheld. On September 12, 2018 a signed copy of the above letter was returned by the developer accompanied by a notation and letter dated 9/12/2018 from APEC (attached). This letter identified comments/revisions and requested incorporation into the OPA amendment. An email response dated September 13, 2018 (attached) was sent to APEC advising that the OPA amendment must be drafted in accordance with the deal points contained in the letter of September 11, 2018 as expressly directed and authorized by Council. A non-substantive addition to clarify that the income targeting will range from 30% up to 80% AMI as referenced in the September 12, 2018 APEC letter was included in the draft amendment. The developer's "comments/revisions" letter of September 12, 2018 that includes substantive deal points such as deadline changes, lack of Kidney Lot via grant deed and a long term lease is attached for Council consideration. ENVIRONMENTAL FINDINGS Staff has performed a preliminary environmental assessment of this project and has determined that it falls within the Class 31 Categorical Exemptions as set forth in CEQA Guidelines Section 15331 which exempts the maintenance, repair, stabilization, rehabilitation, restoration, preservation, conservation or reconstruction of historical resources. Furthermore, Staff has determined that none of the exceptions to Categorical Exemptions set forth in the CEQA Guidelines, Section 15300.2 apply to this project. LOCAL PREFERENCE N/A FISCAL IMPACT The proposed amendment provides additional security for the Agency's investment in the project pursuant to the Approved Amended and Restated OPA agreement dated January 16, 2015 and does not commit additional funds. Attachments: Hotel Fresno-4% Scenario dated 8/6/2018 Letter to APEC dated 9/11/2018 Letter from APEC dated 9/12/2018 Email to APEC dated 9/13/2018 First Amendment to the Restated and Amended Hotel Fresno Owner Participation Agreement